· Trump’s China press conference could mark the end of his cautious approach to Beijing
President Donald Trump said he would hold a news conference “on China” on Friday, but he offered no details as to what he would say.
Even without any details, Trump’s announcement Thursday at the White House was enough to send markets tumbling.
Between 3:15 p.m., when news of the Friday presser hit wires, and the 4:00 p.m. close of the trading day, the Dow Jones Industrial Average fell 300 points, giving up its positive gains for the day and ending down half a percent.
The White House did not immediately respond to questions from CNBC about the content of tomorrow’s presidential announcement.
· Yen perks up, dollar sags as markets jittery before Trump speaks on China
The yen rose against major currencies on Friday as caution ahead of U.S. President Donald Trump’s press conference on China’s treatment of Hong Kong triggered safe-haven inflows.
The dollar drifted lower against the euro and the British pound but could quickly reverse course amid growing concern about tense relations between the world’s two biggest economies.
The focus shifts to Trump’s response to China’s passage of a national security law for Hong Kong, which could ignite a diplomatic row between Washington and Beijing.
The greenback was on course for a weekly loss against major currencies as progress in lifting coronavirus lockdowns and stimulus plans in Europe weakened demand for safe havens, but the mood could quickly worsen if Sino-U.S. tensions increase.
The yen JPY=EBS rose 0.5% to 107.09 against the dollar.
The dollar fell to $1.1102 per euro EUR=EBS on Friday, close to its lowest since March 30. The euro drew support from data showing a smaller-than-expected fall in German retail sales.
In the onshore market, the yuan CNY=CFXS held steady at 7.1463 against the dollar. Offshore, the yuan CNH=D3 traded at 7.1641, not far from a record low of 7.1966 reached on Thursday.
· Fed's Kaplan says U.S. economy has bottomed, ties rebound to testing
The U.S. economy has likely bottomed, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday, but a healthy rebound depends on a massive increase in testing so that people feel comfortable resuming traveling, dining out and other pre-crisis activities.
· NY Fed's Williams says central bank has tools more powerful than negative rates
Negative interest rates are not a tool that makes sense for the U.S. central bank, New York Federal Reserve Bank President John Williams said on Thursday.
“We have other tools that I think are more effective and more powerful to stimulate the economy,” Williams said during a moderated conversation organized by Stony Brook University in Long Island, New York.
Williams pointed to low interest rates, forward guidance and the Fed’s balance sheet as tools the central bank could use to help the U.S. economy return to maximum employment.
“I don’t think negative rates is something that makes sense given the situation we’re in because we have these other tools that can be used.”
· If the Fed opts for negative rates, it will need to be a ‘Hail Mary,’ Standard Chartered says
Should the U.S. Federal Reserve opt to take its benchmark funds rate into negative territory, it will need to “go deeply negative” with a cut of between 50-100 basis points below zero, according to Standard Chartered Bank.
The Fed has unleashed an unprecedented barrage of monetary stimulus in a bid to shore up the U.S. economy against the economic impact of the coronavirus pandemic. However, Chairman Jerome Powell has denied that taking its benchmark overnight lending rate below zero is under consideration, despite pressure from U.S. President Donald Trump.
Speculation of negative rates has nonetheless persisted, and although not the bank’s base-case scenario, Standard Chartered analysts said in a note Wednesday that it could occur in the event of a disappointing economic rebound and exhaustion of other policy options. They suggested that if negative rates were to emerge as a last resort, the central bank would need to go deep.
“No one likes trying a ‘Hail Mary’ from midfield as the clock ticks down when you are losing, but you kick the ball a long way in that situation – there is no point to a short pass,” said Steven Englander, head of global G10 FX research and North American Macro Strategy at Standard Chartered.
· IMF says pandemic may skew economic data and cause them to be less accurate
Key economic indicators may be skewed, and perhaps less accurate, as a result of the coronavirus pandemic, according to the International Monetary Fund.
“Accurate and timely economic data are crucial for informing policy decisions, especially during a crisis. But the COVID-19 pandemic has disrupted the production of many key statistics,” the fund said in a blog post this week.
The coronavirus disease, formally known as Covid-19, first emerged in the Chinese city of Wuhan last December. It has since infected around 5.8 million people and killed more than 360,000 globally, according to data compiled by Johns Hopkins University.
“Without reliable data, policymakers cannot assess how badly the pandemic is hurting people and the economy, nor can they properly monitor the recovery,” read the post written by three members of the IMF’s statistics department.
· German retail sales fall far less than expected in April
German retail sales fell at their fastest pace since 2007 in April, data showed on Friday, but the drop was not as steep as expected in a sign of the relative resilience of Europe’s largest economy during the coronavirus crisis.
Retail sales dropped by 5.3% on the month in real terms after an upwardly revised drop of 4.0% in the previous month, data from the Federal Statistics Office showed. The reading was much better than a Reuters forecast of analysts for a 12% fall.
On the year, retail sales dropped by 6.5% in real terms after an upwardly revised contraction of 1.2% in March. A drop of 14.3% had been forecast.
Retail sales are a volatile indicator often subject to revision.
· Japan April household spending seen slumping due to coronavirus emergency: Reuters poll
Japan’s April household spending likely tumbled at the fastest pace in decades, a Reuters poll showed on Friday, as the nation’s state of emergency to fight the spread of the coronavirus prompted people to stay home and businesses to close.
The depth of the economic fallout from the pandemic in the current quarter has already been signaled by April data for exports, factory output and the jobs market, with the broader economy having already slipped into recession in the March quarter.
Household spending is forecast to have fallen 15.4% in April from a year earlier, the poll of 13 economists showed, heralding the biggest decline since comparable data became available in 2001.
In March, the spending fell 6.0%.
· Oil prices fall as U.S. fuel demand remains weak
Oil prices edged lower on Friday after U.S. inventory data showed lackluster fuel demand in the world’s largest oil consumer while worsening U.S.-China tensions weighed on global financial markets.
Brent crude slipped 25 cents, or 0.7%, to $35.04 a barrel by 0334 GMT and U.S. West Texas Intermediate crude was at $33.18 a barrel, down 53 cents, or 1.6%. Still, both contracts are set for a fifth weekly gain, helped by production cuts and optimism about demand recovery in other countries.
Reference: CNBC, Reuters, Kitco
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